Our Factoring Business, Legal Mechanisms And Risk Analysis

As far as this essay concerned, the essence of factoring is trade financing based on the credit-right assignment. Around two logics including the service content of factoring and basis of law, this essay demonstrates the factoring existing in our law system and its risk of existence from different points of views, which concretely include the comparison with legislation of each country, comments on different perspectives, basis of theory and reality, consummating of our factoring regulations and the design for legislation as well. This article analyzes the risk faced by each parties involved in the factoring procedure and proposes corresponding strategies. It emphasizes that under the existing law system, we may establish relevant system to improve the factoring and issues suggestions to control risks on the particular stress on the operation.Starting with the concept of factoring, the article evolves through the connotation of factoring as the clue; it proposes problems step by step and gives answers. The whole dissertation contains seven points not including the introduction and conclusion parts:The first and second points discuss on the definition and classification of factoring business. From point of view of different parties involved in factoring business, factoring possesses different functions and service contents. Therefore, it is not easy to generalize the connotation and extension of factoring. On the basis of compared analysis, this essay defines that the factoring is the comprehensive financial service provided by the factoring agents who purchase the accounts receivable derived from the goods sales contract signed by two parties and provide two certain or more services from the following: trade financing, management for the subsidiary ledger of sales, collection of the accounts receivable and the default security. Meanwhile, starting with different perspectives and characteristics, the dissertation classifies the factoring and expatiates the signification therein. According to the function inspection to different types of factoring, the author finds that their common ground is the function of trade financing which is the most important point as well. Thereby, the essence of factoring is trade financing based on credit-right assignment discussed in the third point is introduced, which turns to be the theoretical premise for the discussion on the legal system and risks.The following fourth point further explores the value of factoring system. This part of reasoning educed by standing on three positions including factoring agents, seller and the buyer as the third party of factoring. This article dissertates the value of factoring system closely connected with its financing essence, which lays a theoretical foundation for the analysis on the status and existing problems for developing the establishment for the factoring system in our country discussed in the following parts.The fifth point analyzes the risks faced by factoring agent, seller and buyer combined with the deficiency of our system and the risk existed in factoring itself. This essay holds that factoring, as a financial settlement instrument which is just the same as others, is confronted with the risks of market, credit, operation and law. What's more, the author makes detailed expositions towards each type of risk. The market risk contains risks for exchange rate and interest rate, while the credit risk covers the credit risks for the buyer, seller, relevant factoring agent and nation. The author, relying on the operation and practice mostly and combining the theories, gives a description to the risk and discovers its sticking point, which lays a structural transition for the discussion on the strategies to the risks in the following parts.The following is the research for the measures to each kind of risk mentioned above. The author suggests evading the market risk by applying various kinds of financial instruments, preventing the credit risk from the seller through establishing the promissory system, keeping away from the credit risk of the buyer through multi-faceted credit investigation and purchase of credit insurance. The author specifically lists the items which should be paid attention to in the practice, and finally issues the preventive measures to the legal risk combined with the present law in our country. The suggestions provided herein possess strong practical operation of nature, and fully integrate the author's work and practice experience.In the conclusion part, the author concludes and summarizes the basic point view and the theoretical and practical signification of this essay in the logic sense.